As a Republican elected official in a southeastern state, I have a front-row seat to what this article points at.
The road construction industry used to be a great opportunity for small business people to create for themselves a substantial income. These days, all the companies in our area are owned by conglomerates, backed by billion dollar financial institutions. If you were to risk a million or two or an asphalt plant, they will undercut your prices till you go bankrupt, then inflate their prices once again. The two companies in our area will bid on all of our projects, but it's clear they are in cahoots when it comes to their pricing.
By our estimates, the taxpayers are overpaying by at least 15% - 20%. In my mind, this robs others of opportunity and transfers wealth from tax-paying citizens to billion dollar companies.
No one points this out because the road builders give a lot to politicians. Go against them, and they'll spend enough to have the public label you a RINO which, in this neck of the woods, can get you booted from office.
I've wished for some time that someone could create a modular asphalt plant that can be packed up on trucks and taken to wherever the job site is. I think companies like this could help regulate prices and make a lot of money.
Your problem is that big business has conflated free-market capitalism with the right to monopoly and convinced your constituency that anti-trust regulation is destructive to a free market when, in truth, oligopoly leads to corruption of the free-market and a farce of capitalism.
You need to work on educating your citizenship gradually until they understand the conditions wherein capitalism actually works. That way they might see why breaking up big busines and preventing M&A is often the Right Thing™️ and conservative to do.
Pretty sure parent is aware what "their problem" is, seeing as they have a front seat to it. ;)
And "educating the citizenry" as a feasible tactic in local races is an exercise in futility. For the cost of an educational campaign, his or her opponent (or their supporters) could run attack advertising that would certainly lose parent the election.
Aggregating like businesses and pushing for change higher up the political food chain is more effective, albeit not without its own risks.
Conflated, or used the shibboleth of "free-market capitalism" as a cover for monopoly mercantilistic rent-extraction.
Having put a fairly considerable amount of study into the history of economic thought, back to Greek and Roman times (see Backhouse's The Ordinary Business of Life for a comprehensive, if dry, overview of mainstream economic thought), and with a strong focus on Smith to present, this problem is a pervasive one.
The irony is that it's practiced quite ardently by many of the loudest "defenders" of free-market systems. (Not always -- there are straight-up monopolists who have given up all pretense. Most, though, preach and act inconsistently.)
How do you keep the big companies from making the contract awards process too difficult for entrant players. I've seeb see this, for example, in [TLA] contracting where in practice some players hire full time staff at 100k+ to even get all the forms correct.
And then if the contracting award process is too easy, how do you fix the problem of keeping fraudsters out and the contractors accountable?
So problem, as I understand, is that it requires significant amount of capital to get going for independent company, and they might go under if big company cut them. And the big companies undercut independent ones so later they could raise price.
So I had this question - what if state would commit to 10-20 years worth of contracts with some kind of locked in rate (adjusted for inflation or something), not just one off contract? This way independent company would have more motivation to do major capital investment, and big companies will not be able to undercut small players on one off job, only to get all next ones for 20% more..
I've floated this idea around but what I found out was that it's against our state's laws to have such open contracts. Changing the state law would be difficult (road builders have a big voice in state government). We also, by law, have to accept the lowest bid that meets specs, even if that means higher prices in the long run. Championing accepting higher bids would be difficult come election time. The attack ads would read, "Politician A wants to give his buddies a sweet-heart deal at the expense of the taxpayer."
some places have laws were one govt contact can't be more expensive than the previous similar job. if there are no bidders, the posting should remain open for a long time (12months here).
doesn't solve everything, but the intent of those laws is to make that harder.
maybe one day an even bigger company such as Amazon will eat the asphalt companies lunch then. Their margin is someone bigger's opportunity. Or maybe 15-20% profit is just reasonable and competitive with other industries.
So is the logical end goal of this system to have a single company that makes all economic decisions as they use their excess capital to take over other industries?? That sound's like the end goal is not going to be functionally different from communism other than that the theoretical super company's goal will be to make its shareholders rich and communism government as least pretended like they wanted to help all their citizens
15-20% over the proper amount, above and beyond their normal profit. That's not all that unusual in that space. I worked in a field closely tied to the industry. I'm amazed it functions as well as it does.
That estimate is based on the fact that since the last true independent company in our area was bought out by the big guys, prices for all subsequent jobs rose 15% - 20%. I'm all for business making as much profit as possible. I'm not against profit, I'm against predatory pricing that limits competition.
This reminds me of a book called Four Futures, that explores different economic futures that humanity might face, and it just so happens that one of those futures is Rentism, similar to what is described in this piece.
The article is very hand-wavy about the core rent seeking argument. There is much discussion about factors such as productivity improvements concentration of market power and mergers and acquisitions.
From TFA: "says Blankenburg, “the data show very clearly that the means used to obtain these profits cannot be reduced to the use of productive technologies.” Other mechanisms, such as lobbying or mergers and acquisitions, the authors find, have played a significant role in enhancing the market power of dominant companies. “You can show quite clearly how surplus profits increase with mergers and acquisitions, or how changes in regulation that favor control over intellectual property rights for large corporations have a pretty-instant impact on the profit performance of those companies,"
That's the sum total of the rent seeking argument. There is nothing in there demonstrating use of IP to extract rent (which, arguably isn't even rent seeking behaviour, but for the sake of argument may be granted here). My intuition is that profit extraction due to IP for the very large companies is most obvious in pharmaceuticals, but that's just my guess?
There are a few interesting points in this article, but it's weakly written.
This is a super interesting. 2 interesting bits of history I feel people need to consider on this topic;
Firstly in my limited discussions I'm surprised how many people fail to recognise economic equality the west see's today is not normal. It's a ~70 year blip in 5,000 years of history that was heavily manufactured to be this way. Not a result of 'capitalism' as many people I've seen discussing this like to say. As 50 years ago most western countries had more government managed economies than today.
And more interestingly, I wonder how society will react under democracy assuming we move to the historic norm of increased wealth inequality. As democracy in terms of masses having the vote is only about 100 years old. Less for other non-white backgrounds. As before this voting was restricted to land owners and men.
Anyway I would think democracy would act as a pressure value but maybe not. Have a look at this list for how things played out over the years;
This is a very interesting point. In the grand scheme of the human race is it realistic to call 60's-80's America, the best time time the middle class has ever had?
Best is very subjective. And I as an Australian look at this from that view. I do think it would be fair to say this period gave 2 very core human benefits to the masses better than any other period; security and opportunity.
Security being access to; income, housing and healthcare.
Opportunity being; social mobility and access to education.
IMO these 5 points should be the core goals of a functioning society. Outside this much of the rest works itself out.
Oh and the other one I thought of while writing, we didn't have any great wars during this time. Not to diminish Vietnam/Korea but the majority didn't experience war like many previous modern era generations had.
Why isn't the conclusion that the political systems are too powerful then? Regulatory capture and IP issues are the fault of a political system that can wield too much power.
The limited government people would seem to have a strong case that power should be removed from the political system since it is so easily corrupted.
I don't quite understand how the answer to a political system easily manipulated is to make it even more powerful.
Is the problem that governments have too much power, or that they place what power they do have in the service of the rentiers instead of the people? The more power you take away from government, the more government-like power corporations themselves will wield directly. What kind of world will it be when all essential services are provided - or withheld - at the whim of the already powerful? When environmental or workplace regulation are replaced by courts, and the courts themselves are "arbitration services" run by the very same people you're suing, backed by security services run likewise? When the unprofitable or unpopular become "outlaws" in the very real sense of being denied basic services or protections afforded to the more compliant?
No, that dystopia - not a coincidence that so many SF writers have predicted it - is not the direction we should go. Governments have a responsibility to represent the people collectively where the people can not represent themselves individually. True liberty requires that tension between people-via-government and other kinds of power. It's awful that the government we have is pulling on the wrong end of the rope, but saying they should drop it entirely is practically the same. They should be pulling on our side.
This "make government tiny" philosophy leads to oligarchy and neo-feudalism as sure as Soviet communism did, for much the same reason. It's just another tactic that the autocratically minded use to weaken or discredit their potentially most effective adversary. What we need is a robust government willing to stand up to the oligarchs, not kowtow to them.
Even if you claim that the outcomes are the same, you cannot claim that the paths are identical, that's just lazy argumentation that ignores the history of philosophy.
> Even if you claim that the outcomes are the same, you cannot claim that the paths are identical
I didn't claim the paths are identical, and don't believe they are. I said the reasons are much the same. They both deny human nature. One relies on a level of altruism that doesn't exist. The other relies on a level of "rational self interest" that doesn't exist. Both rely on a level of honesty that doesn't exist. Similar reasons, less similar paths, almost identical outcomes.
> that's just lazy argumentation
No, lazy argumentation is presenting no argument but a link to someone else who says "Time forbids the treatment of that phase of the subject here" when addressing the matter at hand. There is no way to that anarchist (what we would now call libertarian) utopia but the same kind of revolution that led to communism's notable real-world failures. Furthermore, there is no way to maintain such a system and keep it from devolving into oligarchy other than to have a robust government to keep the four monopolies from re-forming. This "anarchy" in practice ends up looking a lot like modern socialism.
Or maybe people shouldn't be allowed to be acquire so much wealth in the first place. We can keep the government powerful and effective, but remove the overwhelming influence that immense wealth has.
Maybe . . . It's not intellectual property that keeps internet companies at the top of the pile, for the most part, unless we are counting trade secrets and domain names as intellectual property (and they are in a sense, but not the sense that requires a government to create an artificial market for them).
There is a strong underlying point to this though, pretty much predicted by RMS and it so far seems to be going in that direction. The last revision of the GPL tried to address some of the IP related consequences but there is only so much that can be done from that angle.
Large piles tend to get larger, that's the major issue.
All of which were blatantly mismanaged. More importantly, it's not as though the collapse of these piles suddenly led to a redistribution of the wealth they amassed...
Agreed, the only way this has been achieved in the past has been taxes on corporations and high net worth individuals as well as anti-trust laws (which target both large companies and high net worth individuals). At this point you have to wonder how long this Gilded Age will last.
It's easy to be a monday morning quarterback about management. Even so, no company is immune from blatant mismanagement. It's not a no-brainer to effectively manage a large corporation, not remotely.
For an example, look at Apple in the 1990s. A series of CEOs were all unable to get the company moving again, until Jobs was asked to return. (And those CEOs were all experienced and well-educated businessmen.)
When the company declines, the "amassed wealth" evaporates, because the value of the company as a company disappears. There isn't any wealth to redistribute, and the holders of that wealth were diminished along with it.
They get larger until the next paradigm shift. But what if we reach an asymptote, and there is no paradigm shift to serve as the force of decay? Of course, such a thing is unprecedented so we won't realize it until it already happens. Personally, I think that point was reached in about 2007, and the internet itself has been carving up every interaction that can be usefully computer mediated by a handful of super-scale vendors.
This is irrelevant when the problem we are considering is concentration of the market forces. Of course in this process many large firms will be swallowed by even larger companies. Market concentration doesn't guarantee that large companies will continue to exist, only that the remaining ones will own most everything.
Do you think Amazon, Facebook or Google won’t buy out their would-be destroyers, regulators willing? And I don’t see any signs of unwilling regulators lately.
When Facebook was growing there was a fear on Google that Facebook would lead to Google's irrelevance. Google+ was a very clear response to that. Still, Google couldn't buy Facebook and couldn't kill it.
Microsoft couldn't kill/buy Google, Walmart can't kill/buy Amazon. Microsoft and Walmart are still big, but not that powerful anymore.
So while i think they can buy their would be destroyers, that is actually very hard, because they mostly only realize that too late, or are stopped by something else (Microsoft did buy shares of Facebook before Google).
> From 1955 to 2016 only 12% of firms remain in the Fortune 500.
I used to have a chart which showed the top 10 corporations by market cap, decade by decade. You didn't have to go very far back before you didn't even recognize the company names.
I'm old enough to remember all the fear IBM struck into the hearts of everyone in the computer biz in the 1980s, fear that seems so laughable now it's hard to even remember it.
Same thing in the 1990s, but with Microsoft.
Other companies that inspired fear and certainty they'd take over the world - HP, AT&T, RCA. RCA? Anybody even recall that RCA was the name of a company, and not just the plug ends on your stereo equipment?
Anyone remember that old WKRP episode where they were making fun of the fear of "The Phone Company", i.e. AT&T?
There's a good reason for the decline of large corporations - they get too bureaucratic and complicated to manage efficiently. They tend to accumulate too much entrenched interest in obsolete models and technology. I.e. the world passes them by.
I know you're being coy picking the example from your list where the market leader wasn't simply forced out by an even bigger market leader.
But in fact we have seen a lot of consolidation in the photographic industry. Back in the days of film everyone had to choose from a select few manufactures of chemical film. but people who created photography had a wide variety of equipment manufacturers to choose from, and those who did it professionally had a wide variety of sales channels into which to sell what they produced. Good photography was valuable and many thousands of people could support themselves as freelance photographers.
Now we still have a decent set of SLR vendors. There's Nikon, Canon, Sony. Um, probably some Chinese manufacturers. The point and shoot market has been eclipsed by the camera phone, for which there are now exactly two platform providers.
But the collapse in price of photographs also produced a collapse in value of photography. All those freelancers found their sales channels dry up. There wasn't Look or Life or Nat Geo or hundreds of other publishers who needed photographs and were willing to pay top dollar for excellent work. Instead photographers found themselves trying to sell the rights for pennies on a few photo agency platforms, or more likely surviving entirely on event work.
The choke point at film manufacturing went away for sure, but we have a new choke point at the publishing and delivery end, and this choke point exerts vastly more control over the entire industry than the film duopoly ever did.
How many such platforms can you name? How many such platforms would a typical member of the public be able to name? What is the distribution of traffic across such sites? (Hint: Zipf's Law applies.)
Why is it that the information / comms world continuously, since at least the early 20th century, seems to settle on a single dominant provider, or at best, a handful of leading contenders within a field? Telegraph, telephones, television, computer equipment, computer languages, operating systems, social networks, "Web portals", etc., etc.
Seems to me that having so many people taking and publishing photographs driving the price to zero is the literal opposite of choke points and concentration of market power.
Not often addressed in the largest of internet companies is how little the pay for bandwidth and transit. Google literally pays ZERO for internet access in either direction since they bought so much fiber in late 90s early 2000s. This is how they can run search (both directions) and youtube.
All markets are "artificial". Intellectual property is no different to other forms of property in this regard. Both require a government to enforce the laws that create them.
I think this phenomenon is visible in the reaction that large corporations have to disruptive technologies or ideas. Take the music industry's reaction to efficient audio compression formats like MP3: to pretend they didn't exist and/or sue people who used them. There also seems to be a whiff of this in the telecom industry's aggressive pursuit of anti-net-neutrality legislation. In both cases, there are large industries or entities (with lots of inertia) that have enjoyed a long stretch of dominance and profitability. Then, they're challenged by an idea or technology. However, they'd prefer to simply keep making money in the same way they always have. Therefore, their reaction is not to adapt their business model, but to try to kill the technology or idea.
The road construction industry used to be a great opportunity for small business people to create for themselves a substantial income. These days, all the companies in our area are owned by conglomerates, backed by billion dollar financial institutions. If you were to risk a million or two or an asphalt plant, they will undercut your prices till you go bankrupt, then inflate their prices once again. The two companies in our area will bid on all of our projects, but it's clear they are in cahoots when it comes to their pricing.
By our estimates, the taxpayers are overpaying by at least 15% - 20%. In my mind, this robs others of opportunity and transfers wealth from tax-paying citizens to billion dollar companies.
No one points this out because the road builders give a lot to politicians. Go against them, and they'll spend enough to have the public label you a RINO which, in this neck of the woods, can get you booted from office.
I've wished for some time that someone could create a modular asphalt plant that can be packed up on trucks and taken to wherever the job site is. I think companies like this could help regulate prices and make a lot of money.